Posts Tagged ‘construction’

Earlier this year OSHA fined two construction companies over $115,000 following a crane accident that killed one worker and seriously injured another. The construction companies were working on a bridge when the decedent was struck by the boom of a crane that overturned. Another worker was seriously injured when he was ejected from the crane cab.

OSHA fined the construction company in charge of operating the crane $105,000 for one willful violation and five serious violations for allegedly failing to train workers regarding their roles and on ways to use signaling methods. The company also allegedly failed to attach the crane to the proper barge and failed to implement or meet minimum requirements of a critical lift plan, including designating a lift conductor and organizing lift preparation meetings.

OSHA had inspected the company five times since 2009 and following the latest incident OSHA was placing the company on the Severe Violator Enforcement Program, which focuses on employers with willful, repeat, or failure-to-abate violations.

The other company provided manpower for erecting girders on the project. It was fined $13,200 for four serious violations including: failing to develop an effective safety program, faling to conduct competent and qualified trainand failing to comply with crane operating standards.

The construction law attorneys at Harmon & Davies are here to assist contractors with developing effective safety programs and with contesting OSHA citations. Above all, we care about our construction clients and we can’t emphasize enough how important it is for them to have the proper safety procedures in place to protect their workforce.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

In 2012 the Superior Court of Pennsylvania, in the matter of Commerce Bank/Harrisburg, N.A. v. Kessler et al., ruled in favor of a general contractor by finding that the general contractor’s mechanics’ lien had priority over the mortgagee’s lien. For those outside the construction industry this might not be titillating news, but for members of the industry (and their lawyers) who rely on mechanics’ liens to ensure payment, the holding is welcome news.

The story starts in October 2006 when the general contractor contracted with a couple to build them a luxury home in Harrisburg. Shortly thereafter, the GC started excavating. A few months later, in January 2007, the couple got a construction loan from what is now Metro Bank for up to $435,000, which loan was secured by an open-ended mortgage that was recorded that same month.

The home was substantially complete in August 2007. Unfortunately, the couple was unable to make their mortgage payments and Metro Bank filed a mortgage foreclosure action against the couple and obtained a default judgment against them for $403,994.84 in July 2008. The couple also failed to make their payments to the general contractor and the general contractor obtained a default judgment against the couple in the amount of $411,304.14 in February 2009.

Thereafter, Metro Bank and the general contractor became entangled in a legal battle over which judgment took priority, in other words, there was a dispute over which party was first in line to collect the proceeds from the sale of the home. The trial court entered an order holding that the judgment entered in favor of the general contractor took priority over the judgment entered in favor of Metro Bank. Metro Bank appealed.

Under the 2007 amendments to Pennsylvania’s Mechanics’ Lien Law, Section 1508(c) awards priority to a mortgage over a mechanics’ lien where the mortgage constitutes:

(2) An open-end mortgage as defined in 42 Pa.C.S. 8143(f) (relating to open-end mortgages), the proceeds of which are used to pay all or part of the cost of completing erection, construction, alteration or repair of the mortgaged premises secured by the open-end mortgage.

49 Pa.C.S.A. 1508(c)(2) (emphasis added). Metro Bank took the position that this section of the Mechanics’ Lien Law gave its mortgage priority over the general contractor’s mechanics’ lien, but the general contractor argued that the open-end mortgage upon which Metro Bank based its lien did not satisfy the requirements of Section 1508.

Indeed, it was undisputed that a portion of the proceeds of the open-end mortgage in this matter paid for expenses other than “completing erection, construction, alteration or repair of the mortgaged premises.” Rather, some of the proceeds were used to pay costs such as tax claims, closing costs, satisfaction of an existing mortgage on the property, and payment of other judgments and liens. The general contractor argued that to allow use of funds for reasons other than those expressly set forth in Section 1508(c)(2) would, for example, permit a lender and owner to defeat a contractor’s lien rights by using as little as $1.00 out of $1,000,000.00 for the enumerated purposes set forth in Section 1508(c)(2) and therefore Metro Bank could not rely on Section 1508(c)(2) to subordinate the general contractors mechanics’ lien on the property.

The Superior Court of Pennsylvania agreed with the general contractor finding that Section 1508(c)(2) only extends priority to mortgage loans where the proceeds were used to pay the expenses set forth in Section 1508(c)(2). The court interpreted the use of the term “the proceeds” to mean all of the proceeds and agreed with the general contractor that any other interpretation of the statute would permit lenders and owners to improperly manipulate the system to defeat lien rights

In ruling in favor of the general contractor, the court also disagreed with Metro Bank’s contention that the mechanics’ lien was invalid on the basis that it allegedly failed to contain the statutorily mandated statement of the kind and nature of materials furnished. Although the general contractor’s lien claim described the kind and character of the work as “all labor and materials required for the construction of a two story residential dwelling” and referred to the construction contract, Metro Bank argued that because the lien claim failed to attach the drawings and specifications referenced in the contract, the statement of the kind and character of the labor and materials furnished was too vague. As such, Metro Bank asserted that the mechanics’ lien was invalid.

The general contractor argued that his lien was not invalid because he substantially complied with the requirements of the Mechanics’ Lien Law. Again, the court agreed with the general contractor noting that multiple Pennsylvania cases interpreting the “contents of the claim” section of the Mechanics’ Lien Law have long held that “in considering a mechanics’ lien claim, it must be kept in mind that substantial compliance with the Act is sufficient” and that the express terms of Section 1503((5) only required a general statement of the kind and character of the labor and materials furnished. Accordingly the court held that the lien claim sufficiency described the nature of materials furnished.

Lesson Learned: If all the proceeds of a mortgage were not applied to the cost of completing erection, construction, alteration or repair of the mortgaged premises, a contractor’s mechanics’ lien claim should take priority over the lien of a mortgagee. Of course, these things can vary depending on the circumstances of an individual case and it is highly recommended that a general contractor consult with a lawyer to ensure that its lien rights are protected to the maximum extent possible.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

In 2009, Pennsylvania enacted the Home Improvement Consumer Protection Act (“HICPA”), which act mandated, among other things, that residential contractors enter into written home improvement contracts with homeowners in order to protect homeowners from contractors taking their money and leaving town without doing the work. Under the statutory language of the HIPCA if a contractor does not enter into a written contract with a homeowner, the contractor is barred from pursuing a breach of contract action against the homeowner because the statute states that no home improvement contract shall be valid or enforceable against an owner unless it is in writing, legible, and contains the home improvement contractor registration number of the contractor performing the work. [Disclaimer: there are also other requirements that a home improvement contract needs to meet].

Many people who read the HICPA reasonably interpreted it to mean that if a residential contractor did not enter into a written home improvement contract with the homeowner, it was not possible for the residential contractor to recover money owed as a result of the contractor’s work. Thus, it seemed like the HIPCA imposed a particularly harsh penalty on contractors who performed work on a property without a written home improvement contract. Many of our clients lamented that this new statute was simply unfair to contractors.

Fortunately, our legal system is structured in such a way that courts can sculpt the effect of statutes via interpretive opinions that shed light on grey areas. This is precisely what happened late this summer when the Superior Court of Pennsylvania issued an opinion in Durst v. Milroy General Contracting, Inc. In this case, the homeowners contracted a residential contractor to perform home improvements and the parties entered into an oral contract. After the residential contractor completed the work, he submitted a written invoice to the homeowners and a dispute arose. The homeowners refused to pay the residential contractor any money.

The contractor decided to sue, but the lack of a written contract complicated matters. Initially, the contractor’s lawyer filed a complaint against the homeowners alleging counts of breach of contract and quantum meruit, but the attorney smartly amended the complaint to allege only a count for quantum meruit because, as discussed above, the lack of a written contract would have made any breach of contract action dismissible.

By way of background, quantum meruit, a Latin phrase meaning “what one has earned” is an equitable remedy to provide restitution for unjust enrichment in the amount of the reasonable value of one’s services. Where unjust enrichment is found, the law implies a contract, which requires the defendant to pay to the plaintiff the value of the benefit conferred.

The homeowner’s attorney then sought to dismiss the contractor’s complaint on the grounds that it was an attempt to collect on an oral home improvement contract, which attempt is strictly prohibited by the HICPA. The homeowner’s lawyer further argued that the HICPA also precludes residential contractors from collecting on a quantum meruit theory. The trial court refused to dismiss the contractor’s case ruling that the HIPCA was silent regarding whether a contractor could pursue a quantum meruit claim where a contractor performed services with no written contract and was left completely uncompensated. Upset with that ruling, the homeowners essentially got the trial court’s permission to appeal the decision to the Superior Court of Pennsylvania on the grounds that the HICPA is a new statute with no interpretative precedent.

On appeal, the Superior Court of Pennsylvania considered whether the HICPA precludes lawsuits where home improvement work was conducted, but no written contract exists and the contractor is seeking to recover under a quantum meruit theory. In agreeing with the trial court’s decision, the Superior Court noted that the contractor’s complaint alleged that the contractor conferred a benefit on the homeowners in the form of home improvements and that the homeowners accepted and retained at least some of those home improvements under circumstances that would make it inequitable for the homeowners to retain the home improvements without compensating the contractor.

Under such circumstances, the PA Superior Court concluded that the homeowner’s reliance upon the HICPA as a defense in its action was misplaced because the contractor was not pursuing a contract theory; rather the contractor’s lawsuit was based on a quantum meruit theory. The court noted that although the HICPA requires a written home improvement contract in order to maintain a breach of contract action, the HICPA is silent as to actions in quasi-contract, such as unjust enrichment and quantum meruit, which by definition implicate that for whatever reason, no written contract existed between the parties. Thus, the Court held that quasi-contract theories of recovery survive the HICPA and the trial court did not err in allowing the contractor to move forward with his claims.

This case is a win for residential contractors. If you or your company need assistance with the preparation of a home improvement contractor or any other construction law related matter, the attorneys at Harmon & Davies, P.C. are here to serve you.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

The Severe Violator Enforcement Program that OSHA started nearly two years ago continues to grow as the number of severe violators nearly doubled since last year. According to OSHA data, as of June 30, 2011, 330 establishments are designated as “severe violators” and as of July 2011, 182 employers have been sited under the enforcement program. To be declared a severe violator, a company must have experienced a fatality or an accident that hospitalized at least three workers or have been cited for significant violations of OSHA standards.

A majority of the establishments on the list were placed there as a result of inspections producing two or more willful, repeat, or failure-to-abate citations for “high-gravity” violations related to hazards classified as “high emphasis” by OSHA. High-emphasis hazards include falls, amputations, entrapment in excavations, combustible dust, shipbreaking, grain handling, and overexposure to lead or silica.

Construction Companies Make Up Majority of the List. Sadly, construction companies account for 52 percent of the businesses on the severe violators list (down from 61% last year). Manufacturing makes up the next largest chunk of severe violators with 3 percent. One possible reason why construction companies account for over half of the businesses on the severe violators list is because the construction industry involves high emphasis hazards. For example, citations for hazards such as lockout/tagout or crowded exits do not trigger Severe Violator Enforcement Program designation. Thus, a small roofing company cited for repeat fall prevention violations might be on the list while a retain chain store cited for repeat violations of improperly stacked boxes won’t be.

How to Handle Being Placed On the Severe Violators List. If your company is placed on the severe violators list it has four options: (1) contest the citation; (2) enter into an informal settlement with OSHA; (3) enter into an enhanced settlement agreement with OSHA; and (4) choose not to challenge the citation. Since June 2010, 59 companies have been removed from the list after successfully appealing the citations that landed them on the list. Currently, 34 percent of the companies on the list are contesting the OSHA allegations. A quarter of the sited businesses have settled with OSHA with 22 signing an “enhanced settlement agreement” and 3 percent agreeing to informal settlements. An enhanced settlement could involve any of several options such as: hiring safety and health consultants, making the settlement apply to all the company’s sites, and submitting quarterly injury and illness reports to OSHA. Finally another forty-four percent of the companies on the list are not challenging their citations.

If you need assistance with contesting an OSHA citation, the attorneys at Harmon & Davies, P.C. can assist you.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

In November 2006, the Occupational Safety and Health Administration (“OSHA”) cited and fined Volks Constructors, a full service heavy industrial contractor, $13,300 for failing to properly record certain workplace injuries and for failing to properly maintain its injury log between January 2002 and April 2006. The contractor contested the citations on the grounds that they were untimely because they were issued at least six months after the last recorded injury occurred. Pursuant to OSHA regulations, no citation may be issued after the expiration of six months following the occurrence of any violation.

By way of background, the Occupational Safety and Health Act provides that each employer shall make, keep and preserve records of workplace injuries and illnesses. OSHA regulations require employers to record information about work-related injuries and illnesses in three ways:

(1) employers must prepare an incident report and a separate injury log within seven calendar days of receiving information that a recordable injury or illness has occurred;

(2) employers must prepare a year-end summary report of all recordable injuries during the calendar year, which summary must be certified by a company executive; and

(3) the employer must save all of these documents for five years from the end of the calendar year that those records cover.

In the case of Volks Constructors, OSHA began an inspection of Volks in May 2006 and discovered that Volks had not been diligent in completing its logs, forms, and summaries between 2002 and 2006. OSHA then took approximately six months to issue a set of citations to Volks for violations related to Volks’ failure to fully complete incident report forms, its failure to enter injuries in the log, its failure to conduct year-end reviews between 2002 and 2005 and, in at least one instance, its failure to have the proper person certify the year-end review. Notably, Volks was not cited for any violation of the requirement that it save the forms and the log for five years.

Volks’ improperly recorded injuries occurred between January 11, 2002 at the earliest and April 22, 2006 at the latest. By the time OSHA issued the citations in November, however, the citations were issued a maximum of 54 months after the earliest improperly recorded injury and a minimum of six months, plus ten days, after the latest improperly recorded injury.

Volks moved to dismiss the citations as untimely because OSHA regulations state that no citation may be issued after the expiration of six months following the occurrence of any violation and the injuries giving rise to Volks’ recording failures took place more than six months before the issuance of the citations. An OSHA Administrative Law Judge (“ALJ”) ruled in favor of OSHA and Volks appealed to the Occupational Safety and Health Review Commission (“OSHRC”). On appeal the Secretary of Labor argued that Volks’ violations were continuing violations that prevented the six month statute of limitations from expiring until the end of the five-year document retention period. The Secretary essentially argued that because Volks’ violations were still occurring on May 10, 2006 when the inspection began, the citations were timely because they were issued within six months of May 10, 2006. The Commission agreed with the Secretary and affirmed the citations. Volks then filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit.

On review, the District of Columbia Circuit was asked to decide whether OSHA’s record-keeping requirement, in conjunction with the five-year regulatory retention period permits OSHA to subvert the six-month statute of limitations.

In reviewing the Commission’s decision, the Circuit Court noted that pursuant to OSHA regulations, OSHA may cite employers for violations within six months of the violation’s occurrence; meaning if an injury is reported on May 1, OSHA can cite an employer for the failure to create a record beginning on May 8, and may issue a valid citation for such failure anytime within the following six months, and only the following six months. Moreover, once an employer has made such a record, it must also retain it for five years. If the employer loses or destroys a record before the end of the five year record retention period this is another violation. OSHA may cite employers for violations of the five year record retention requirement within six months of the violation’s occurrence. In other words, OSHA may cite a company for failure to maintain its records for the required five years for six months after the fifth year, and only for six months after the fifth year. In the Volks case, OSHA never cited Volks for a violation of the five year record retention requirement because it could not cite Volks for the loss or destruction of a record that Volks never made. Rather, OSHA only cited Volks for the failure to create a record.

Thus, the DC Circuit Court concluded that the citations were issued far too late and therefore had to be vacated. The court concluded that the statutory language which deals with record keeping is not authorization for OSHA to cite the employer for a record-making violation more than six months after the recording failure. Rather, OSHA must enforce record-making violations swiftly or else forfeit the chance to do so.

In reaching this decision, the DC Circuit Court strongly disagreed with the Secretary’s argument that the five year record keeping requirement extended the statute of limitations by noting that the Secretary’s interpretation incorrectly assumed that the obligation to maintain an existing record expands the scope of an otherwise discrete obligation to make the record in the first place. The Circuit Court viewed the two obligations as distinct stating “one cannot keep what never existed; a company cannot retain a record it never created.”

Notably, the DC Circuit Court distinguished the Volks case as a case of inaction ( i.e., Volks failed to properly create certain reports) from a case of continuing action. For example, the court noted that where a company continues to subject its employees to unsafe machines, or continues to send its employees into dangerous situations without appropriate training, OSHA may be able to toll the statute of limitations on a continuing violations theory because the dangers created by the violations persist.

Based on the decision reached in the Volks case, if you receive an OSHA citation more than six months after a discrete violation of an OSHA regulation, you should strongly consider contesting the citation on the grounds of timeliness. The attorneys at Harmon & Davies can assist you with contesting OSHA citations.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.